SENECA PAPER COMPANY Price Competition on Gummed Tape| |
October 9, 2010
Seneca Paper Company (SPC) is a gummed paper company operating in Niles, Michigan. SPC offered 3 types of tape; a 3rd grade tape named Durable, a standard grade called Sealite and a super standard grade called Imperial. Within the same industry there are 5 major players including SPC. However, SPC marked a considerable presence in terms of market share largely in the Midwest. This can be illustrated as follows: Market Players| Market Share|
| National| East Coast| Midwest|
Pheonix Paper Company| 18.0| 13.5| 4.5|
Seneca Paper Company| 10.0| 2.5| 7.5|
Compton Paper Company| 10.0| 7.5| 2.5|
Fletcher Corporation| 6.0| 1.5| 4.5|
Potsdam Tape Company| 6.0| 4.5| 1.5|
3 Medium-Size Producers| 5.0| 0.0| 5.0|
Remaining Producers| 45.0| 45.0| 0.0|
| 100.0| | |
On December 10, 1987, SPC had decided to announce a price increase for its three grades of gummed sealing tape to be effective in January 9, 1988. The decision was contributed by the deteriorating profit experienced by SPC since 1985. As a result of the announcement, some producers had increased their prices too, however, several producers still did not follow suit. Thus, SMC had to decide whether to withdraw the price increase strategy or to shelf the price hike decision until February 8, 1988.
SPC’S BUSINESS VISION AND MISSION
Continue to be the market leader in the gummed paper industry specifically in the Midwest.
To give customers high-quality gummed tape values for their sealing and packaging tasks and ensuring customers satisfaction at all level. SITUATION ANALYSIS ~ SWOT SUMMARY/ANALYSIS
External/Internal | Key Strengths (S) * Largest supplier in Midwest * Industry knowledge * Strong sales division team| Key Weaknesses (W) * Limited advertisement channel * High reliance on jobbers (80%) * Small national accounts sales (10%) | Key Opportunities (O) * Low capital requirement * Brand conscious buyers * Operating at more than 60% capacity | S/O Based StrategiesUse influence as market leader and expertise to upgrade the operating capacity to more than 60%| W/O Based StrategiesDiversify ways of advertising the product to gain mass attention | Key Threats (T) * Highly competitive industry * Industry price reduction * Major producers’ influence the pricing strategy| S/T Based StrategiesDemonstrate benefits over alternative| W/T based StrategiesFollow industry market leaders’ action to be competitive in the industry|
MARKETING GOALS AND OBJECTIVES
SPC’s goal is to increase the price of its current product line and remain as the market leader in the Midwest.
To change the price of its product line by February 8, 1988 as follows: Grade| Brand| Old Price| New Price|
3rd Grade| Duratape| $11.60/bundle| $12.20/bundle|
Standard| Sealite| $12.20/bundle| $12.80/bundle|
Super Standard| Imperial| $13.10/bundle| $13.70/bundle|
SPC used a market penetration strategy to retain its market in the Midwest. By leveraging on its existing products to existing market, SPC sought to increase its sales by increasing the product line prices and thus, widening its profit margin.
Market Segmentation, Target Marketing, Positioning
SPC to focus its marketing strategy to the Midwest region and concentrate on retaining its existing market audience.
SPC’s existing customers and other potential customers in the Midwest. As other sub-segment on the target, SPC can also include...